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The global car industry is in the weakest state it’s been, possibly since the Second World War. No really, it’s that bad. At the same time, the global microchip shortage has already brought automakers to the point of halting production altogether, another shortage entirely out of the industry's control is threatening to deliver another devastating gut punch.
Around 90% of the world’s supply of magnesium comes from China. Magnesium is a metal that’s vital to the construction of a number of different automotive components. When mixed with aluminum to form an alloy, it’s used in everything from fuel tanks to seat frames and alloy wheels.
So when the Financial Times reported the Chinese government had forced the shutdown of more than half of its magnesium smelters, the effects were soon felt all around the world. The first signs that a coming magnesium shortage might be ready to bring another brutal blow to the auto industry came back in late August of 2021.
Only after a notice was issued by the Yulin Municipal Development and Research Commission that new restrictions would be placed on Chinese magnesium production at least until the end of the year. These restrictions would cause some plants to shut down entirely, and others to cut their production by as much as half. This event caused a rapid and dramatic uptick in prices for the metal, which took only 30-some days to have drastic effects on the industry’s reserve supply.
Estimates from mid-September of this year by Fastmarkets.com calculated that the value of magnesium at that time was 40,000-45,000 yuan ($6,207-6,983) per ton, an increase of 36% from the prior week. It’s a sign that when reports emerge from October and November, the number will have increased even further.
This series of events could form a dynamic duo with the current microchip shortage that could see the entire auto industry brought to its knees before the start of next year. That’s a nightmare scenario the industry should start preparing for and not take lightly, even for a second.
So when the Financial Times reported the Chinese government had forced the shutdown of more than half of its magnesium smelters, the effects were soon felt all around the world. The first signs that a coming magnesium shortage might be ready to bring another brutal blow to the auto industry came back in late August of 2021.
Only after a notice was issued by the Yulin Municipal Development and Research Commission that new restrictions would be placed on Chinese magnesium production at least until the end of the year. These restrictions would cause some plants to shut down entirely, and others to cut their production by as much as half. This event caused a rapid and dramatic uptick in prices for the metal, which took only 30-some days to have drastic effects on the industry’s reserve supply.
Estimates from mid-September of this year by Fastmarkets.com calculated that the value of magnesium at that time was 40,000-45,000 yuan ($6,207-6,983) per ton, an increase of 36% from the prior week. It’s a sign that when reports emerge from October and November, the number will have increased even further.
This series of events could form a dynamic duo with the current microchip shortage that could see the entire auto industry brought to its knees before the start of next year. That’s a nightmare scenario the industry should start preparing for and not take lightly, even for a second.
Google News